Orem City is currently seeking to create a community development project area (CDA) to redevelop the University Mall into a “City Creek of the South.”
No one can blame Orem for wanting to have its own version of retail development that is proving to have a positive impact in Salt Lake City. But Orem officials think the best way to attract a similar project is to provide tax breaks for one specific developer and leave behind many other businesses that have been an integral part of the city and its tax base.
The CDA proposal calls for Woodbury Corporation, the owner of the University Mall, to receive a 75% tax break for 20 years on all new property tax revenues that come as a result of the mall property being renovated. Estimates are that Woodbury could see a $63 million tax break, $44 million of which will be diverted away from the Alpine School District throughout the life of the CDA.
Plenty of businesses in Utah County would jump at the chance to receive a similar tax break, but instead, elected officials have opted to help out one business and leave the others unsure of their future, as they will have to compete in an unfair business environment.
This CDA also causes your Taxpayers Association concern because it is focused on attracting retail activity that already occurs somewhere in Utah without a subsidy. With only a few exceptions (see the August 2010 issue of The Utah Taxpayer for a more thorough explanation of those exceptions), Tax Increment Financing, such as RDAs and CDAs, only redistribute where retail sales occur rather than increasing retail activity. Building another shopping mall won’t create demand. It will only shift where that demand is met.
In other words, rebuilding the University Mall and building a new office building may attract businesses from other local areas to locate in Orem, but it won’t bring in a large amount of new economic activity to the city or the state.
In the past, if RDA/CDAs are located in brownfields, which have negative value where a developer would have to pay for cleanup or demolition before the property could be developed, then such assistance might be appropriate.
After studying the University Mall proposal, your Taxpayers Association has concluded that almost all of the economic activity that would occur on the property would otherwise occur in the greater community without a subsidy.
Consequently, the Utah Taxpayers Association opposes the CDA for the University Mall, and hopes the remaining taxing entities that are involved with this issue, Utah County, Alpine School District, Orem Metropolitan Water District and the Central Utah Water Conservancy District will join us in opposing it.
The taxing entity taking the biggest hit for the subsidy is Alpine School District, giving up $44 million in revenue to subsidize the project. Amazingly, there are only three of the seven members of the Alpine School board who are definitely opposed to the project: Paula Hill, Wendy Hart, and Brian Halladay. The other four, Deborah Taylor, JoDee Sundberg, John Burton, and Scott Carlson are actually considering supporting the proposal to give $44 million of the school district’s property taxes for the University Mall subsidy! These school board members are quick to complain that Alpine is one of the lowest school districts in spending per student in Utah, which is dead last among the 50 states in spending per student, yet they are actually seriously considering this boondoggle.
Because this is such a politically volatile issue and could affect the school board elections on November 4, the school board is putting off the decision until after the elections. Your Taxpayers Association believes that if the school board does not have the political courage to make this decision before the election, it shouldn’t decide the issue at all, but rather, leave it to the incoming school board.